Mobile Banking Experiencing Increased Adoption

As an increasing number of institutions pursue mobile banking initiatives, questions remain over which delivery model is best, whether consumers really want the service and how banks can realize a return on their investments.

After lying dormant for more than five years, mobile banking is causing a flurry of activity in the U.S. financial services industry. Now, many of the nation's top 10 banks are up and running with their own mobile banking solutions, and financial institutions of all sizes are busy assessing their places in the mobile banking world. But each bank has to decide if, in fact, mobile banking is a good bet for it, and, if so, which strategy it should pursue.

Mobile banking in the U.S. did not come out of the gate running. It first appeared a little before 2000, but when it failed to catch on over the following few years, most banks abandoned their original efforts. As an example, Wells Fargo shuttered its original mobile banking operations in 2002. It had only 2,500 users at the time. But the San Francisco-based bank relaunched its mobile banking solution in July, though it declines to disclose the current number of users.

There are several reasons why banks are having more success with mobile banking this time around, says Stessa Cohen, Gartner (Stamford, Conn.) research director. "One is the uptake of mobile phones in the U.S., in particular, more smart phones and newer phones," she says. "Consumerization of IT is the other trend." Because consumers, mostly in younger generations, are comfortable using their cell phones for a variety of functions -- including sending and receiving text or short message service (SMS) messages, checking game scores and purchasing ring tones -- they are more accepting of new mobile activities, such as banking and making payments, Cohen explains.

These and other factors have led to increased adoption of mobile banking in the past six years. Even skeptics such as Forrester (Cambridge, Mass.) analyst Catherine Graeber, author of the report, "Raining on the Mobile Banking Parade," says overall U.S. mobile usage is up 58 percent in the past six years, and the numbers are trending even higher. According to Forrester, U.S. mobile phone ownership will grow to 121 million households -- 88 percent of the U.S. household population -- by 2012.